According to former U.S. diplomat Wendy Cutler, President Trump's tariffs could lead U.S. allies to seek closer ties with countries like China and India.
Key Points
- Trump's tariffs may drive allies towards China and India.
- The EU might consider joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
- Countries should prepare for Trump's unpredictable tariff policies.
U.S. President Donald Trump listens as Indian Prime Minister Narendra Modi speaks during a joint press conference in Washington, DC.
The U.S. president is threatening tariffs on European alcohol, while the EU plans counter tariffs on $28.33 billion in U.S. goods. These policies aim to favor America but have affected Canada, Mexico, and China as well.
Cutler noted that traditional U.S. allies like the EU are pursuing ambitious negotiating strategies, including a major deal with Mercosur countries and renewed negotiations with India.
'China Can Help'
Cutler also pointed out that China is actively seeking stronger relationships with other countries, upgrading its free-trade agreement with ASEAN. She warned that if U.S. partners can't rely on the U.S., they may find China more attractive.
David Roche of Quantum Strategy echoed this sentiment, suggesting Europe needs to explore alternative markets like China due to rising tensions with the U.S.
Euro and US Dollar banknotes.
Cutler emphasized the importance of respect and trust in negotiations, stating that unfair treatment can hinder progress. She suggested countries may increasingly turn to multilateral trade agreements like the Regional Comprehensive Economic Partnership (RCEP) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which the U.S. isn't part of.
Policy of Chaos?
Despite these potential shifts, it remains difficult to imagine countries completely severing trade ties with the U.S., the world's largest economy.
Stephen Olson of the ISEAS-Yusof Ishak Institute noted that Trump's unpredictable tariff policies may be a deliberate strategy to keep trade partners on edge. He advised U.S. allies against trying to find logic in Trump's approach.
Olson believes Trump prefers to keep trade partners in a state of uncertainty rather than seeking concrete resolutions.